Experts dispense advice for newcomers wanting to take their first steps into the marketplace

For Lana Gojmerac, choosing the mutual funds for her registered retirement savings plan was a daunting task.

“It felt like picking off of a questionnaire,” said the 36-year-old.

“It was scary to blindly pick.”

Taking the first steps into investing can be intimidating for many of us – after all, most of us work hard for our money. And parting with it is rarely easy, especially when considering the ups and downs of the stock market. The trick is figuring out which investment strategy is best for you.

The choices for investments seem endless; there are mutual funds, Canada savings bonds, mortgage investments, guaranteed investment certificates and stocks – just to name a few. These can be purchased at banks, discount brokerages or full-service brokerages.

Three years ago, Gojmerac, an oil accountant, took back the reins on her finances and hired a financial planner, putting an end of her days of blind investment strategies.

“The planner gave me more understanding of why you pick (a certain mutual fund) – and the reasons made sense to me,” she said. “If you have a good financial planner and you trust them, it’s easy.”

Recently, Gojmerac dove even further into investing by enrolling in “Basics of Investing,” a class put on by Mount Royal University and Alberta Securities Commission – an agency that aims to enforce Alberta’s security laws to protect investors.

“If it seems too good to be true, it probably is” – Michael KolodnickiThe instructor of the course, Michael Kolodnicki, advised investing newbies not to be afraid to put their hard-earned dollars to use.

“Start as early as you can,” said Kolodnicki, an investment adviser from TD Waterhouse. “It’s money working for you.”

Which begs the question, How easy is it to start investing? Here, two local experts share five tips for newbies to keep in mind when looking for ways to put their cash to work.

A good investment is like having money grow on trees.
Photo illustration: Derek Mange
1. Outline your goals and time frame

Kolodnicki advises potential investors to clearly define what they hope to accomplish with their investing, and whether these goals are long-term or short-term. For instance, aiming to build a cushy retirement fund is a good long-term goal, he explains. On the other hand, he says if you’re looking to make enough cash to pay a monthly car payment, investing may not be the best option.

2. Find the right financial advisor

While advisors aren’t a requirement for investing, Robert McCullagh says a licensed financial advisor can help new investors navigate the ins and outs of the marketplace.

“Investing is like a relationship – it’s easy to get into, but complicated once you’re in,” says McCullagh, a principal advisor for Benefit Planners Inc.

However, advisors do charge a fee for their services, which may deter some new investors; after all, the purpose of investing is to increase capital – not spend it.

3. Start small

Before hitting the stock markets, Kolodnicki urges newbies to head into their banks. From here, newcomers can consider and purchase a range of low-risk investments – like mutual funds or guaranteed investment certificates. These can be bought at a variety of price points – whether you have $20 to spare, or $20,000.

4. Understand the risks and rewards

“If it seems too good to be true, it probably is,” says Kolodnicki about the many different guarantees and investment opportunities out there. To reap a hefty reward, he says, there is often a hefty risk factor involved.

But not all risk will result in a return, according to McCullagh.

“Generally, we believe that by taking more risk, we get more reward,” he says. “But taking dumb risk doesn’t necessarily mean more reward.”

Potential investors also need to be aware of fraud and can address any security concerns by contacting the Alberta Securities Commission.

5. Keep your emotions out of it

Many investors easily get caught up in the excitement and emotion of the marketplace, says McCullagh.

“There are two main drivers to our market – greed and fear,” he says. “Even if it’s just for the short-term, you still need to be prepared for the possibility that the market value could fluctuate.”

kmcmackin@cjournal.ca